In our recent interactions, most internet companies have indicated a sharp increase in share of mobile traffic over the last 12 months – e-tailers like Snapdeal have been indicating that over 50% of transactions are now happening over mobile compared to only 5% at the beginning of 2013, for app dominated businesses like Ola and Zomato 70-80% of traffic is coming through mobiles, for Makemytrip (and other OTAs) 40% of traffic is now coming through mobile vs. less than 10% a year back; for Naukri, Justdial and 99acres mobile traffic accounts for 35-40% of total and is expected to rise further. As a result, investment in mobile platform is a key focus area for most internet companies currently. We note that even 200mn would still imply a penetration of only 28% of the total mobile subscriber base in India suggesting significant growth potential even from here.
E-Commerce Logistics Big Employment Opportunities
In a recent media interview, Flipkart’s founder indicated that the company now has 33,000 employees. This is a staggering number even assuming that it includes the employees at Myntra, which it acquired in May last year. We understand that a large number of these employees are in their in-house logistics team – Flipkart indicated the technology team has 1,000 Engineers . Strong hiring activity is also visible in other internet companies – Info Edge’s employee strength has increased 33% YoY mainly driven by hiring at 99acres; Zomato’s employee strength has increased from 750 six months back to 1100 currently and the company is planning to add another 1200 employees over the next 12 months.
Fund raising of US$800mn in Jan, US$950mn so far in 2015. Capital raising in the sector maintained its momentum in January with US$800mn of fund raising reported in the media.
Media reports indicate that the Ministry of Consumer Affairs has recently moved a note to the Committee of Secretaries that proposes that various aspects of e-commerce be regulated by different ministries / government bodies. Issues such as predatory pricing and unfair trade practices could then be monitored by the Ministry of Corporate Affairs and Competition Commission.
IMAI Wishlist for Budget – FY2015-16
Tax holidays similar to what had been given to the IT/ITeS sector. Higher tax deduction on salary paid to new employees. Preferential tax treatment to initial/angel investors in the sector. Higher tax deduction on R&D spend on developing local language content and simplified VAT.
While digitization should have significant access benefits on the social front, most studies suggest a significant economic flow-through in productivity & job creation. According to a World Bank study, a 10% increase in broadband penetration increased GDP growth by 1.4% in low- to-medium income countries. We hope this Government led by Narendra Modi will give further impetus to make India the best Digital Economy at least in Asia.